They Are Back…… Low Inventory and Multiple Offers Frank Mears, ABR, CDPE, CNE, CRB, CSP, GRI, SFR, SRS, SRES
The Big Story of 2013 Low inventory Investors scooping up bank inventory Home Builders’ reduction Home owner holding back Bank shadow inventory The Result: prices going up
Seeds of a housing shortage Inventory of existing homes at its lowest level in seven years. New construction at a 50 year low mark Distressed home listings will continue to fall as fewer owners are delinquent. Normal non distressed home owners have been holding off selling until the market gets better Lawrence Yun, NAR Chief Economist
Multiple Offers The most frustrating situation faced by REALTORS® Potential for misunderstanding What is fair? What is honest? What is to be done? Who decides? There is never a simple answer to complex situations 5
What type negotiator is the other agent? Soft Hard Principled
Multiple Offers Tilts the negotiating scales in favor of the seller? Always ask if there are multiple offers Always ask who has the other offer 7
Standard of Practice 1-15 REALTORS, in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS shall also disclose, if asked whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. Does the Listing Agent Have to Tell? Multiple Offers : No
Standard of Practice 3-4 REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing broker’s firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). … (Amended 1/02) Variable Rate: Yes
The Seller’s side The risks to seller and the seller’s agent: Unhappy buyers Multiple offer don’t always result in a higher price. Some or all of the buyers could elect to walk away “Highest and best” may result in a better offer or result in no offers Seller inadvertently obligates to more that one contract
$1000.00 more than the next highest Offers that are $1000.00 more that the next highest up to a certain amount. Good idea of not? Buyer may pay less than willing Buyer may pay more that intended Two Buyers make the same offer Dishonest seller
Presenting Multiple Offers 1. Individual presentation Presented to the seller and listing agent only 2. Group presentation All offers are presented at the same time with all representatives present Buyers should be notified if others will hear offer details 12 124
$370 Asking Price#1#2#3#4 Offer $375k$367$352k$354k 1 st deposit $1k$5k$10k$7k 2 nd deposit $0$5k$10k$8k Inspect noneHm/PestFull PQ/PA/Cmt nonePQPACmt Mtg Cmt 6 weeks4 weeks 2 weeks LTV 100%90%80%50% Close 120 days90 days60 daysFlex Conditions $10k closing costs Home sale contingency Hm pendnone Adjusted Gross $365k$367k$352k$354k Presenting using the grid method
Counter Offers Implement the negotiating strategy Reassess objectives Identify points of agreement and differences Prolonged, incremental negotiating is risky—seller may take another offer or buyer may walk 14 100
$370 Asking Price#1#2#3#4 Offer $375k$367$352k$354k 1 st deposit $1k$5k$10k$7k 2 nd deposit $0$5k$10k$8k Inspect noneHm/PestFull PQ/PA/Cmt nonePQPACmt Mtg Cmt 6 weeks4 weeks 2 weeks LTV 100%90%80%50% Close 120 days90 days60 daysFlex Conditions $10k closing costs Home sale contingency Hm pendnone Adjusted Gross $365k$367k$352k$354k Which offer would you ‘counter’?
The Buyer’s Side 1.Develop a good rapport with the listing agent. We like to do business with agents that we have a good relationship with. Don’t be difficult to deal with.
The Buyer’s Side 1.Gather information on the seller with the skill of a detective 2.Encourage the buyer to make a strong offer (give the seller what's important to them) 3.Strike while the iron is hot 4.Encourage the buyer to NOT “Major in the Minors” 5.A letter to the seller?
The Appraisal Issue Multiple offers may drive the price up for the seller but will it appraise. What happens if it doesn’t? Seller counter special stipulation: “Buyer agrees to pay any difference between the sales price and appraised value in cash at closing” (Have a local attorney draft the language to conform to the laws in your state)
Remember Every negotiation is different and each is a learning experience. The best negotiators are the ones with the most information. “Knowledge is Power”
Thanks For Having Me 2013 Frank Mears Seminars, Inc. FrankMears.com 22
2013 Frank Mears Seminars, Inc. FrankMears.com 23 FrankMears.com